House prices rose in November but gains will be 'modest' in years ahead as soaring rental returns boost buy-to-let

House prices are likely to remain subdued throughout next year as first-time buyers continue their battle to get on the property ladder, Halifax said in its latest price index.

The High Street lender believes house values will remain within a margin of between plus and minus two per cent during 2013, ending the year at similar levels to now before slowly climbing as the economy strengthens.

Property prices did rise by one per cent month-on-month in November to reach an average of £160,879, but they lack any clear direction, the bank said, with five monthly rises and six falls this year.

Rollercoaster: There have been five monthly price rises and six falls this year, according to Halifax

Prices are 1.3 per cent lower than they were a year ago, which shows ‘remarkable stability’ against the tough economic backdrop, according to Halifax.

But the study predicts that conditions for would-be first-time buyers will remain tough next year, which will in turn keep up the pressure on the rental sector.

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Rents have soared as people have remained trapped, either because they cannot raise the deposit needed or meet lenders' toughened borrowing criteria.

According to LSL Property Services in its latest index, the average monthly rental cost for tenants in England and Wales has increased for the last seven months in a row to £744 per month – 3.4 per cent higher than the same time last year.

Halifax says the potential for attractive returns on rents for landlords will mean further growth in the buy-to-let sector in 2013.

House prices: The table from Halifax shows how values have remained fairly level throughout 2012

Martin Ellis, housing economist at Halifax, said pressures such as rising utility prices and slow wage growth are likely to continue to restrict the number of home buyers, while the outlook for the wider UK economy remains unclear amid continuing problems in the eurozone.

Mr Ellis said that against this difficult background, any house price growth is likely to remain ‘modest’ in the next few years.

He said: ‘House prices are likely to rise, albeit very slowly, beyond 2013 as the economic recovery strengthens.

‘Economic growth, however, is likely to remain below the long-term average pace for some time as the household sector continues the lengthy process of rebalancing its finances and the fiscal squeeze is maintained to bring the public finances under control.’

Speaking about his predictions for next year, he added: ‘Prices are again likely to end the year at levels close to where they begin, with the market continuing to lack any genuine direction.’

Elsewhere, the index predicts that the North/South divide is set to continue, with house prices likely to be strongest in London and the South East amid strong demand from overseas buyers looking to protect their money from the eurozone's troubles.

Recently published Land Registry figures for October showed that prices grew by seven per cent year-on-year in London but dropped by six per cent over the same period in the North East.

Also level: Nationwide in its latest index found that house prices have remained flat this year

Halifax said that the market will be given some support next year by measures such as a £80billion Government scheme launched in August to boost lending to firms and households, which has caused an increase in mortgage availability.

Mortgage payments have also become more affordable amid low interest rates. Typical payments for a new borrower take up around 26 per cent of their take-home pay, compared with an average of 36 per cent over the last three decades, Halifax added.

Gabby Adler, independent buying agent, said: 'The distinct lack of confidence in the housing market is set to continue into next year, with prices on the whole flat and bumping along the bottom, give or take a few significant variations from region to region.

'The Autumn market has been slower than expected with fewer new properties coming up for sale so transactions remain at low levels. Things have now wound down for Christmas so there will be little activity now until next year.'